Leiker v. Gafford, 66102

• Decision Date: 25 October 1991
• Docket Number: No. 66102,66102
• Citation: 249 Kan. 554,819 P.2d 655
• Parties: Shawn A. LEIKER et al., Plaintiffs, v. Wendell P. GAFFORD, Defendant/Appellee; Professional Anesthesia, Inc., a Corporation, Defendant/Appellant; George W. Marshall, M.D.; Harris, Hodges & Marshall, Chtd., a Professional Corporation; and Abbott Laboratories, a Corporation, Defendants, and Ronald Todd, Commissioner of Insurance of the State of Kansas, Administrator of the Health Care Stabilization Fund, Intervenor/Appellee.
• Court: Kansas Supreme Court

Page 655

819 P.2d 655

249 Kan. 554

Shawn A. LEIKER et al., Plaintiffs, v. Wendell P. GAFFORD, Defendant/Appellee; Professional

Anesthesia, Inc., a Corporation, Defendant/Appellant;

George W. Marshall, M.D.; Harris, Hodges & Marshall, Chtd.,

a Professional Corporation; and Abbott

Laboratories, a Corporation, Defendants,

and

Ronald Todd, Commissioner of Insurance of the State of

Kansas, Administrator of the Health Care

Stabilization Fund, Intervenor/Appellee.

No. 66102.

Supreme Court of Kansas.

Oct. 25, 1991.

Syllabus by the Court

1. The right of an employer to seek indemnification from an employee for damages suffered by a third party due to the negligence of the employee, when the employer has been found liable solely on the basis of vicarious liability under the doctrine of respondeat superior, is discussed and applied.

2. When an employer has been found liable under the doctrine of respondeat superior for damages to a third person caused by the negligence of an employee, the employer's right to seek indemnity from the employee does not accrue unless the employer pays all or part of such damages.

3. The right to indemnification of an employer from an employee is based upon damage to the employer and may, in an appropriate case, include reasonable attorney fees incurred in the underlying action, but such fees alone do not constitute the requisite damages to the employer necessary to support an action for implied indemnity, nor do such fees equate to payment on an obligation to a third person.

4. Generally, in Kansas, absent an applicable Supreme Court rule or express contractual or statutory authority to the contrary, parties bear the cost of their own attorney fees.

Ronald D. Heck, of Heck & Sheppeard, P.A., Topeka, argued the cause, and Cynthia J. Sheppeard, of the same firm, was with him on the brief for defendant/appellant.

Thomas V. Murray, of Barber, Emerson, Springer, Zinn & Murray, of Lawrence, argued the cause, and Payne H. Ratner, Jr., and Randall H. Elam, of Ratner, Mattox, Ratner, Kinch & Brimer, P.A., Wichita, were with him on the brief for intervenor/appellee.

HOLMES, Chief Justice:

Professional Anesthesia, Inc., appeals from an order of the district court denying its cross-claim for indemnification from Wendell P. Gafford. We affirm.

The facts necessary for a determination of the issues in this appeal are not in dispute and arise out of the underlying medical malpractice judgment in Leiker v. Gafford, 245 Kan. 325, 778 P.2d 823 (1989). Shawn A. Leiker died as a result of the negligent administration of anesthesia by Wendell P. Gafford, a certified registered nurse anesthetist employed by Professional Anesthesia. In the underlying case (Gafford I ), the action was originally filed by James S. Leiker in his representative capacity as the husband and next friend of Shawn A. Leiker, and in his individual capacity. While the proceedings were pending in district court, Shawn A. Leiker died and the pleadings were amended to include James S. Leiker as Special Administrator of Shawn's estate and as representative of the minor children. The defendants in Gafford I were Wendell P. Gafford; Professional Anesthesia, Inc., a corporation wholly owned and controlled by defendant Gafford; George W. Marshall, M.D., the attending physician; his professional corporation; and Abbott Laboratories. Professional Anesthesia filed a cross-claim for indemnification against Gafford. The trial court deferred any action on the cross-claim until final resolution of the action between Leiker and the defendants. The jury determined that Gafford was 90% at fault and Marshall was 10% at fault. The judgment, in excess of two million dollars, was entered against Gafford, Marshall, and their respective corporations. The liability of Professional Anesthesia was predicated solely upon its vicarious liability as the employer of Gafford under the doctrine of respondeat superior.

Following our decision in Gafford I, the trial court considered the cross-claim of Professional Anesthesia against Gafford in which the corporation sought indemnification for any damages it might be required to pay to Leiker and for its attorney fees incurred in defending the underlying action. As Gafford apparently had no intention of defending against the cross-claim, Fletcher Bell, as Kansas Commissioner of Insurance, intervened to represent the interests of the Kansas Health Care Stabilization Fund (Fund). The trial court denied the cross-claim and Professional Anesthesia has appealed. Ronald Todd, the successor to Fletcher Bell, has now been substituted as the intervenor/appellee on behalf of the Fund. Additional facts will be considered as they become relevant to the issues on appeal. The case was transferred from the Kansas Court of Appeals pursuant to K.S.A. 20-3018(c).

Professional Anesthesia raises two issues on appeal:

1) whether Professional Anesthesia can be allowed to seek indemnification from codefendant Wendell P. Gafford; and

2) whether indemnification of Professional Anesthesia can include attorney fees for defense of the corporation.

Although phrased as two issues, the initial determination for this court is whether, when an employer has been found vicariously liable in a negligence action under the doctrine of respondeat superior, an employer may recover attorney fees incurred in the defense of the underlying action when the employer will not be required to pay any part of the judgment rendered against the employee tortfeasor.

In the instant case, it is asserted by the intervenor and not controverted by Professional Anesthesia that the entire judgment against Gafford and Professional Anesthesia has been or will be paid by Gafford's malpractice insurance carrier and the Fund. Therefore, even though a judgment was rendered against Professional Anesthesia on the theory of respondeat superior it will not be required to pay any part of the judgment.

We pause to note that the Kansas Legislature recently passed legislation that eliminates vicarious tort liability in medical malpractice cases involving multiple health care providers who are qualified for coverage by the Kansas Health Care Stabilization Fund. See K.S.A.1990 Supp. 40-3403(h). That legislation applies only to claims filed after July 1, 1986, and therefore has no application to this action, which arose prior to that time.

In the recent case of Bair v. Peck, 248 Kan. 824, 811 P.2d 1176 (1991), wherein we held K.S.A.1990 Supp. 40-3403(h) to be constitutional, we explained the doctrine of respondeat superior and vicarious liability as follows:

"[T]he common-law doctrine of vicarious liability has long been a part of Kansas negligence law. The doctrine was succinctly explained in Simpson v. Townsley, 283 F.2d 743 (10th Cir.1960), where the court stated:

'Under the law of Kansas, there is no distinction between the liability of a principal for the tortious acts of his agents and the liability of a master for the tortious acts of his servant. In both relationships, the liability is grounded upon the doctrine of respondeat superior. Under that doctrine, the liability of the master to a third person for injuries inflicted by a servant in the course of his employment is derivative and secondary and that of the servant is primary.

'....

'Moreover, under the law of Kansas, while a master whose liability is predicated solely on the doctrine of respondeat superior and not on any wrong on his part may be sued jointly with his servant for a tort committed by the latter within the scope of his employment, they are not joint tortfeasors in the sense they are equal wrongdoers. Where a master becomes liable to a third person for personal injuries caused solely by the act of his servant, under the doctrine of respondeat superior and is required to respond to such third person in damages by reason of such liability, he will be subrogated to the rights of the injured third person and may recover over from his servant who is primarily liable.' 283 F.2d at 746.

"The modern theory underlying the common-law doctrine has been described by one authority as follows:

'What has emerged as the modern justification for vicarious liability is a rule of policy, a deliberate allocation of a risk. The losses caused by the torts of employees, which as a practical matter are sure to occur in the conduct of the employer's enterprise, are placed upon that enterprise itself, as a required cost of doing business. They are placed upon the employer because, having engaged in an enterprise, which will on the basis of all past experience involve harm to others through the torts of employees, and sought to profit by it, it is just that he, rather than the innocent injured plaintiff, should bear them; and because he is better able to absorb them, and to distribute them, through prices, rates or liability insurance, to the public, and so to shift them to society, to the community at large.' Prosser and Keaton on Torts § 69, pp. 500-01 (5th ed. 1984).

As a practical matter vicarious liability was recognized as a method of providing a source of recovery for the innocent victim of another's negligence when the actual tortfeasor was unable to respond financially for the damage caused." 248 Kan. at 829-30, 811 P.2d 1176.

In the present case, Professional Anesthesia seeks indemnification not for any money it has paid to Leiker on the judgment but solely for its attorney fees incurred in defending the underlying action. Indemnification is a creature of equity and has its origin in the common law: "The...